Compass Diversified Holdings on Wednesday reported net sales for the quarter ended March 31, 2019, of $402.5 million, up from $344.4 million for the quarter ended March 31, 2018.

The March 31, 2018, net sales do not include Rimports, Foam Fabricators and Ravin net sales prior to CODI’s ownership.

Net income for the quarter ended March 31, 2019 was $110.2 million, as compared to net loss of $1.6 million for the quarter ended March 31, 2018.

First Quarter 2019 Highlights

  • Reported net sales of $402.5 million;
  • Reported net income of $110.2 million;
  • Reported non- GAAP Adjusted EBITDA of $56.7 million;
  • Reported Cash Used in Operating Activities of $8.9 million, and Generated Cash Flow Available for Distribution and Reinvestment (“CAD”) of $17.6 million for the first quarter of 2019;
  • Completed the sale of our Manitoba Harvest subsidiary for a $121.7 million gain;
  • Paid a first quarter 2019 cash distribution of $0.36 per share on CODI’s common shares in April 2019, bringing cumulative distributions paid to $17.8752 per common share since CODI’s IPO in May of 2006;
  • Paid a quarterly cash distribution of $0.453125 per share on the Company’s 7.250 percent Series A Preferred Shares and $0.4921875 per share on the Company’s 7.875 percent Series B Preferred Shares in April 2019;
  • Subsequent to the end of the quarter, promoted Pat Maciariello to newly created position of Chief Operating Officer.

“Our operating results in the first quarter exceeded our expectations, as we reported solid consolidated revenues, net income and adjusted EBITDA growth across our group of leading, niche middle market businesses,” said Elias Sabo, CEO of Compass Diversified Holdings. “During the first quarter, we also realized tangible benefits from previous investments in the management, sales and marketing functions at several of our branded consumer businesses, highlighted by the sale of Manitoba Harvest at a highly attractive valuation and 5.11 Tactical’s improving EBITDA margins.”

Sabo continued, “Our success monetizing Manitoba Harvest resulted in CODI realizing a sizeable gain in just over three years of ownership, increasing total realized gains to over $870 million for shareholders since our IPO. Complementing our focus on building long-term and sustainable value in CODI and its leading subsidiaries, we are pleased to have promoted long-time partner at Compass Group Management Pat Maciariello to the newly created position of Chief Operating Officer. Going forward, our focus remains on continuing to work with our world-class management teams to best capitalize on growth opportunities, implementing our proven and disciplined acquisition strategy, opportunistically divesting businesses and providing sizable distributions.”

Operating Results

Net sales for the quarter ended March 31, 2019 was $402.5 million, as compared to $344.4 million for the quarter ended March 31, 2018. The March 31, 2018, net sales do not include Rimports, Foam Fabricators and Ravin net sales prior to CODI’s ownership.

Net income for the quarter ended March 31, 2019 was $110.2 million, as compared to net loss of $1.6 million for the quarter ended March 31, 2018. Current quarter net income includes the $121.7 million gain on the sale of Manitoba Harvest, offset by a loss on the sale of the Tilray shares received at closing of $5.3 million.

Adjusted EBITDA (see Note Regarding Use of Non-GAAP Financial Measures below) for the quarter ended March 31, 2019 was $56.7 million, as compared to $42.9 million for the quarter ended March 31, 2018. March 31, 2018 Adjusted EBITDA does not include Rimports, Foam Fabricators and Ravin results prior to CODI’s ownership.

CODI reported CAD (see Note Regarding Use of Non-GAAP Financial Measures below) of $17.6 million for the quarter ended March 31, 2019, as compared to $14.0 million for the prior year’s comparable quarter. CODI’s CAD is calculated after taking into account all interest expense, cash taxes paid and maintenance capital expenditures, and includes the operating results of each of our businesses for the periods during which CODI owned them. However, CAD excludes the gains from monetizing interests in CODI’s subsidiaries, which have totaled over $870 million since going public in 2006. The increase in CAD over the prior year quarter is primarily the result of the operating performance of our 2018 acquisitions of Foam Fabricators, Rimports and Ravin, offset by the additional interest cost on our $400 million Senior Notes issued in April 2018.

Liquidity and Capital Resources

For the quarter ended March 31, 2019, CODI reported Cash Used in Operating Activities of $8.9 million, as compared to Cash Provided by Operating Activities of $6.6 million for the quarter ended March 31, 2018.

CODI’s weighted average number of shares outstanding for the quarters ended March 31, 2019 and March 31, 2018were 59.9 million.

As of March 31, 2019, CODI had approximately $39.8 million in cash and cash equivalents, $495 million outstanding on its term loan facility, $400 million outstanding in Senior Notes and $85 million in outstanding borrowings under its revolving credit facility.

The Company has no significant debt maturities until 2023 and had net borrowing availability of approximately $515 million at March 31, 2019 under its revolving credit facility.

First Quarter 2019 Distributions

On April 4, 2019, CODI’s Board of Directors (the “Board”) declared a first quarter distribution of $0.36 per share on the Company’s common shares (the “Common Shares”). The cash distribution was paid on April 25, 2019 to all holders of record of Common Shares as of April 18, 2019. Since its IPO in May of 2006, CODI has paid a cumulative distribution of $17.8752 per common share.

The Board also declared a quarterly cash distribution of $0.453125 per share on the Company’s 7.250 percent Series A Preferred Shares (the “Preferred Shares”). The distribution on the Preferred Shares covered the period from and including January 30, 2019, up to, but excluding, April 30, 2019. The distribution for such period was paid on April 30, 2019 to all holders of record of Preferred Shares as of April 15, 2019.

The Board also declared a quarterly cash distribution of $0.4921875 per share on the Company’s 7.875 percent Series B Preferred Shares (the “Series B Preferred Shares”). The distribution on the Series B Preferred Shares covered the period from and including January 30, 2019, up to, but excluding, April 30, 2019. The distribution for such period was paid on April 30, 2019 to all holders of record of Series B Preferred Shares as of April 15, 2019.